Cloud Peak Energy

Cloud Peak Energy is a spin off of the world's largest mining company, Rio Tinto.

Rio Tinto exits
In its 2009 Annual Report Rio Tinto stated that it held a 48.3% stake in Cloud Peak Energy and its directly owned mines. Cloud Peak Energy also has a 50% stake in the Decker Coal Company, which operates the Decker Mine in Montana. (Rio Tinto's indirect stake in the Decker mine was 24.1%).

However, in December 2010 Rio Tinto announced that it had succeeded in "100 per cent divestment of its equity holdings in Cloud Peak Energy Inc. through a fully exercised over allotment in connection with a recently announced secondary offering." Cloud Peak Energy stated that the result of the divestment was that Cloud Peak Energy Resources LLC "is now a wholly owned subsidiary of Cloud Peak Energy Inc."

Dow Jones reported that "Cloud Peak will use proceeds from the IPO [initial public offering] to buy 52 per cent of the Rio Tinto's assets it operates and Rio Tinto will own the rest." The wirte service also reported that early in November Standard & Poor's Ratings Services "assigned Cloud Peak a junk rating of BB minus, three steps below investment grade, citing its need for more reserves among potential risks."

Company Background
In 2007 Rio Tinto announced that "as part of the Groupwide strategic review" it had decided to "explore options for the sale of some or all of Rio Tinto Energy America" (RTEA). In August 2008 Rio Tinto announced that had filed a registration statement with the U.S. Securities and Exchange Commission (SEC) forshadowing a proposed initial public offering (IPO) of the common stock in Cloud Peak Energy. At the time Rio Tinto stated that CPE would comprise "most of the North American coal assets of Rio Tinto Energy America and that it expected to "make a final decision on whether to pursue a listing of the shares of Cloud Peak Energy or to pursue another form of divestment once these options have been more fully explored." (The lead underwriter for the IPO was Credit Suisse Securities.)

In its August 2008 prospectus for its Initial Public Offering, Cloud Peak Energy stated that "we are the second largest producer of coal in the U.S. and in the Powder River Basin, or PRB, based on 2007 coal production. We operate some of the safest mines in the industry. According to data from the Mine Safety and Health Administration, or MSHA, in 2007 we had the lowest employee all injury incident rate among the 5 largest U.S. coal producing companies. We operate solely in the PRB, the lowest cost coal producing region of the major coal producing regions in the U.S., and operate three of the five largest coal mines in the region and in the U.S. Our operations include four wholly−owned surface coal mines, three of which are in Wyoming and one in Montana, and we own a 50.0% interest in another surface coal mine in Montana. We produce sub−bituminous steam coal with low sulfur content and sell our coal primarily to electric utilities. Steam coal is primarily consumed by electric utilities and industrial customers as fuel for electricity generation. In 2007, the coal we produced generated approximately 6.0% of the electricity produced in the U.S."

CPE stated in its prospectus that "prior to the completion of this offering, various corporate reorganization transactions will be taken to separate certain Colorado−based coal, certain non−coal and other U.S. assets from Rio Tinto plc's western U.S. coal business. We will own Rio Tinto plc's western U.S. coal business except for the Colowyo coal mine in Colorado, which will remain with Rio Tinto plc."

Operating mines
The float of Cloud Peak Energy resulted in it holding RTEA's five open cut coal mines in the Powder River Basin of Montana and Wyoming. These were:
 * the Antelope Coal Mine;
 * the Cordero Rojo Mine;
 * the Spring Creek Mine;
 * the Decker Mine; and
 * the Jacobs Ranch Mine. (While the Jacobs Ranch Mine was initially part of the company's operations, prior to the August 2009 IPO it was sold to Arch Coal.

Cloud Peak Energy to ship more Powder River Basin coal to Asia
In June, 2011 Cloud Peak Energy signed a 10-year deal to ship basin coal to Asia from a port on Canada’s Pacific Coast. Cloud Peak Energy Inc. signed the deal with Westshore Terminals to ship coal through its Westshore Terminal in Vancouver, British Columbia. The company shipped 3.3 million tons of coal through the terminal to Asian customers in 2010.

Cloud Peak wins bid to expand Antelope mine
On June 3, 2011, Cloud Peak Energy placed a successful bid for the West Antelope II North Coal Tract, which was previously nominated by the company’s Antelope Coal Mine. The bid for the lease sale was $297.7 million, or approximately $0.85/ton, based on the Bureau of Land Management’s (BLM’s) estimate of 350 million mineable tons. The West Antelope II Lease by Application (LBA) is subject to pending legal challenges filed by environmental organizations against the BLM and the Secretary of the Interior.

President and CEO of CPE Colin Marshall said: “This tract is expected to more than double the reserves at the Antelope mine and, along with the additional coal within the State of Wyoming lease, add about 12 years of production.” At year-end 2010, the company’s Antelope mine had an estimated 252 million tons of coal reserves, and CPE had an estimated total reserve of 970 million tons of coal. The BLM also recently announced a June 15, 2011, sale date for the West Antelope II South Coal Tract, which contains approximately 56 million mineable tons, according to BLM estimates.

Contact details
Phone: Phone: 307 687 6000 Website:http://www.cloudpeakenergy.com

Related SourceWatch articles

 * Montana and coal
 * Powder River Basin
 * Rio Tinto's coal interests
 * Wyoming and coal
 * United States and coal

External articles

 * Kathy Shwiff, "Rio Tinto spin-off Cloud Peak Energy IPO prices below expectations", The Australian, November 20, 2009.